Why Apple's Patent Infringement Payout Is Still in Play

Last week, a jury smacked Apple with a $625.5 million bill for patent infringement. The suit was brought by Mirror Worlds LLC, a firm founded by Yale professor David Gelernter, which developed the technology we know as Cover Flow, the sleek GUI that Apple users use to sift through files on Macs, iPhones, and iPods.

Apple has since challenged the verdict, arguing that it would be "triple dipping" for Mirror Worlds to collect $208.5 million for each of the three patents violated. We spoke with Alexander Poltorak, chairman and CEO of General Patent Corporation, an intellectual property firm. Poltorak has worked in IP litigation for more than two decades, and offered his insight on the lawsuit between Apple and Mirror Worlds.

Fast Company: What are you initial thoughts on the verdict?

Alexander Poltorak: Frankly, I am not terribly surprised. The patented technology involved in the lawsuit strikes at the core of the technology that made Apple so popular. It gives Macs, iPhones, and iPads this visual appeal, a beautiful GUI that was invented by Professor Gelernter. Relative to the booming sales of the allegedly infringing products, this verdict is not terribly large or unusual.

Apple purchased Cover Flow several years ago, and was granted a patent for the GUI. Isn't that an issue?

This is a question of willfulness. A patent is an absolute monopoly in the sense that it gives the patent owner the right to exclude others from making, using, selling, offering for sale, or importing the patented invention into the U.S. Whether they know about it or not is irrelevant. Most of the time, in absolute majority of cases, the product is developed and brought to market without the knowledge that the technology has been invented and patented by someone else. When they bring new products on the market, they find they've infringed someone else's patent. That is why patent infringement is not a crime—because most people commit it without willful intent.

It's really incumbent on any manufacturer to do what is called product clearance, or non-infringement opinion, or freedom to operate—when a company searches for relevant patents that a new product might be infringing on, and suggesting licenses that must be obtained. Many companies ignore this important step. It often occurs in mergers and acquisitions, when the intellectual property aspect of the pre-merger due diligence falls short of identifying the patents that the acquired products might be infringing.

This may be exactly what happened here. Two of three patents were found willfully infringed. That's where the question of knowledge comes to the plate. The judge has the prerogative and liberty to decide whether to enhance awards based on willfulness.

So the award could be more than $625 million?

Absolutely. Hypothetically, the judge has discretion. If the judge feels the jury award was unreasonable, he could decrease it or set it aside completely too.

What do you think of Apple's "triple dipping" argument?

I would agree with Apple that when the award is phrased in this way, it sounds a little bit strange simply because a patent is a monopoly right. Whether you have one patent or 100 patents that relate to the same product, you have the same right to exclude. Your right doesn't become any stronger if you have more patents. However, it is not at all uncommon to calculate royalty rate as a product of the number of licensed patents – the practice established years ago by IBM which would license its patents for 1% royalty per patent (up to 5%). In the light of this well-established licensing practice this award is no "triple dipping."

Is Apple's challenge of the verdict valid?

Apple has filed several post-judgment motions, and none of them are unusual. They are pretty standard.

In your opinion, what will be the outcome? Will Apple pay Mirror Worlds just $208.5 million or more than the full verdict?

It's very hard to guess. There are still a number of variables in play. There's one interesting motion pending that is a motion for laches. If you sit on your rights long enough without enforcing your rights, eventually you will lose your rights. So, if you own your patent, and you know that somebody infringes on your patent, and you don't do anything; and then years later, you wake up and you say, "These guy are making tons of money. Why don't I sue them?" Then a motion for laches is a reasonable defense of that.